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Colorado Towns Say YES To Local Authority; State Lawmakers Take A Stab At More Rural Funding

In Colorado last week, communities held spring elections if they needed to choose elected officials or ask voters to make decisions on local matters. In six rural communities, voters decided to join the almost 120 municipalities and counties around the state that have already voted to opt out of Colorado’s restrictive state law SB 152. Meanwhile, the General Assembly tried to help bring broadband to the state's most rural areas.

A Resounding Yes

In all six towns, the decision to reclaim local telecommunications authority far outpaced the number of voters who voted “no.” In keeping with similar measures we’ve followed during previous elections on this same question, voters want the opportunity to use their own infrastructure to improve connectivity either directly to the public or with a private sector partner. Most communities that put this issue to the voters don’t have a solid plan in place at the time it’s on the ballot, but they understand that opting out of the 2005 law is a necessary step, should they decide in the future to move ahead with a muni or public-private partnership.

The measure always passes and voters usually approve the opt out provision by a wide margin, as was the case on April 3rd. Here’s the tally:

Colorado has been abuzz with activity in recent years as local communities reclaim their right to decide how they handle connectivity improvements. The developments have run into resistance from Comcast and other big national ISPs that feel their monopoly threatened. Last fall, Comcast spent close to a million dollars in a failed attempt to defeat a measure in Fort Collins as the city amended its charter to allow it to invest in a municipal network. Before it could take that step, however, the city held a referendum in the fall of 2015 to opt out of SB 152.

In addition to Fort Collins, several other communities that have opted out in recent years are moving forward. Rio Blanco County is offering connections to some of the most rural areas of the state and a few places, such as Larimer County, and Erie have engaged firms to conduct feasibility studies. Other communities have taken no action, but want to keep options open for the future.

Legislative Boost For New Proposals

Since 2005, SB 152 has complicated local communities’ ability to invest in local Internet infrastructure but leaders at the state level have taken steps this legislative session that may signal shifts in attitude.

Changes to the rules that determine how state funding will be distributed to providers willing to deploy in rural areas were adopted this session. After groans of opposition from CenturyLink, the state’s High Cost Support Mechanism (HCSM) will be restructured to direct more funds to rural broadband infrastructure deployment. The changes have the potential to create competition for CenturyLink and better Internet access options for Coloradoans living in rural areas.

As the incumbent telephone company, CenturyLink has benefitted more than any other company from the existing HCSM funding structure and their lobbyists in Denver put up a fight to keep the status quo. The HCSM is a 2.6 percent surchage that Coloradoans pay on voice landline and mobile phone service - about $33 million annually. Up until 2014, those funds were used to subsidize deployment of more landlines.

In 2014, the state’s General Assembly recognized that it was time to start using some of the funds to deploy broadband connectivity and they restructure the HCSM to split the use of the fund. This year’s SB 2 will speed up the original plan to shift the use of the funds away from landline deployment to broadband projects in unserved areas. As Colorado’s phone provider of last resort, CenturyLink saw that their place at the cash cow teat was at risk and strongly opposed the bill.

SB 2’s chief sponsors Senate President Pro tem Jerry Sonnenberg of Sterling and Sen. Don Coram of Montrose are both Republicans and both interested in speeding along the process of deploying high-quality connectivity in their rural districts. SB 2 will change the current system to increase by 20 percent each year the amount of HCSM funding to be dedicated to Internet infrastructure deployment. By 2024, the entire fund will be allocated to Internet infrastructure projects. The bill passed both chambers and the Governor John Hickenlooper signed it into law on April 2nd.

Redirecting funding away from old landline deployment toward rural broadband infrastructure and opening up opportunities for entities other than CenturyLink to use the funds will help bring deployment to areas that desperately need it. One should note, however, that these funds will only be used for areas where residents and business are considered “unserved.” From the final version:

(32) (a) “Unserved area" means an area of the state that:

(I) Lies outside of municipal boundaries or is a city with a population of fewer than SEVEN thousand FIVE HUNDRED inhabitants; and

(II) Consists of households THAT lack access to at least one provider of a broadband network that uses satellite technology and at least one provider of a broadband network that uses nonsatellite technology.

As some of these extremely rural areas of Colorado obtain broadband access through the new HCSM funding rules, perhaps the General Assembly will consider easing eligibility criteria for projects in communities that benefit in order to create more competition.

On a positive note, it’s refreshing to see a state funding bill that requires projects to provide speeds:

“…OF AT LEAST TEN MEGABITS PER SECOND DOWNSTREAM AND ONE MEGABIT PER SECOND UPSTREAM OR MEASURABLE SPEEDS AT LEAST EQUAL TO THE FCC'S DEFINITION OF HIGH-SPEED INTERNET ACCESS OR BROADBAND, WHICHEVER IS FASTER.” (emphasis ours)

Each year our excitement bubble pops when state funding bills for broadband infrastructure include language that offers public subsidies to telephone companies that propose to build out slow DSL at 10/1 Mbps in rural areas. Just because people live in the country doesn’t mean they want or deserve inferior wireline Internet access. At the moment, the FCC defines "broadband" at 25/3 Mbps. In the past there has been talk of reducing it to 10/1 Mbps, but that discussion seems to have lost momentum.

Will grants go to applicants proposing projects in communities restricted to one DSL provider in the community? Residents and businesses that can subscribe to it will be meeting the definition of "unserved" at ths time if their only option is less than the FCC's definition of broadband. We’d prefer SB 2 eliminate the 10/1 language entirely, but this may be a step in the right direction.

As we reported last month, HB 1099 was moving through both chambers without much opposition. The bill’s language adjusted the right of first refusal which incumbent ISPs have abused in the past in order to stop publicly owned projects and new entrants from developing high-quality broadband infrastructure in unserved areas. The bill, which was signed into law by the Governor on April 4th, now requires incumbents to show that they will provide comparable services at comparable prices if they choose to exercise the right of first refusal to stop grants to a new project.

Apparently, the bill came about as a reaction to a fiasco we covered in episode 256 of the Community Broadband Bits podcast. Doug Seacat’s company had been awarded funding to deploy fiber in the rural areas of Ridgway, but CenturyLink exercised it’s incumbent right of first refusal and took the funding. Instead of investing in high-quality connectivity, however, the telephone company only deployed slightly better DSL. When word got out, elected officials were not amused.

Colorado Locals Say No To Monopolies - Other States To Follow?

CenturyLink and Comcast have been playing dirty pool for a long time and local communities want the opportunity to cast them off and solve their own connectivity problems. As more than 120 municipalities and counties have already decided to reclaim local telecommunications authority and state leaders see the wisdom of local decision making, Colorado is blazing a trail for other states.

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Random Quote

In the case of muni systems, which are not-for-profit enterprises, one measure of “success” is defined as the level of their “take rate” – that is, the percentage of potential subscribers who are offered the service that actually do subscribe. Nationwide, the take rates for retail municipal systems after one to four years of operation averages 54 percent. This is much higher than larger incumbent service provider take rates, and is also well above the typical FTTH business plan usually requiring a 30-40 percent take rate to “break even” with payback periods.